Author Topic: The sucker who complies with tax laws  (Read 12090 times)

Cathy

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The sucker who complies with tax laws
« on: February 28, 2015, 07:40:21 PM »
I sometimes feel like I am the only person in the world who faithfully complies with tax laws. Do you ever feel the same way?

I was reading the California tax statutes today in preparation for completing my California tax return and I came across a regime that I suspect almost no one complies with.

The type of taxation you are subject by California depends on if you were present in the state and, if so, why you were present. To be clear, the California residency regime is totally independent of the federal one described in the Internal Revenue Code. According to 17014 of the California Revenue and Taxation Code, a resident of California includes a person who is present in California for "other than a temporary or transitory purpose".

If you are a resident for the entire year, you have to pay tax to California based on your worldwide income. If you are a nonresident for the entire year, you only have to pay tax to California on your California-source income.

I only moved to California part way through 2014. In that situation, 17041 sets out a rather complicated regime:

  • First, you need to pretend that you have been a resident of exclusively California for your entire life up until now and figure a tax return for each previous year on the basis of that hypothesis, using the California law that was in effect in each past year. The reason you need to do this is because there are various amounts that can be carried forward from past years (most notably, net capital losses) and you need to know those carryover amounts for the next step.
  • Then you need to figure a tax return for the instant taxation year (2014) on the basis that you were a resident of California for the entire year, making use if you can of any carry over amounts from all of the previous returns you prepared for the past years.
  • Next, calculate the percentage of your total worldwide income that you paid to California in the return you prepared in step (2) on the hypothesis that you had resided in California for the entire year. Denote this percentage by P.
  • Next, prepare a return that only includes income that you earned (a) while residing in California, and (b) from California sources while not residing in California. Denote the taxable income on this return by Q.
  • Finally, to figure the tax owed to California, multiply P by Q.


Now, that is already complicated, but it gets far worse when you throw an international element into the mix. Here's why:

  • Virtually none of the US tax conventions apply to state taxation. That means, among other things, that you can (and I do!) have foreign income that is exempt from US federal taxation but that is taxable by California for the purpose of computing the hypothetical California return where you were a resident of California for the entire year, thus increasing the effective tax rate that you have to pay to California.
  • Unlike US federal tax law, California does not recognise any foreign tax shelters. The most interesting effect of this is that if you had a net capital loss inside a foreign tax shelter in a past year, that can possibly actually carry forward to the present year on your California tax return. Therefore, you would be a sucker not to compute every past return. In my case, I know for a fact that I had a net capital loss inside my Canadian TFSA a few years ago, so even though it is a totally absurd amount of work, I am actually going to have to figure all those past year returns under California law to ensure I get the maximum benefit.


Anyway, when I came across this regime I was blown away for a few reasons:

  • I know for a fact that none of my coworkers in a similar situation are complying with this regime. They are just figuring their tax as if they earned no income in their life before moving to California, which will likely cause them to underpay the true tax liability.
  • If you have foreign income in the year before moving to California and it is exempt from federal taxation, then California has no easy way to find out about it, so as far as I can tell no one reports it.

Given the complexity of this taxation regime, I kind of feel like probably no one actually understands it well enough to comply with it. I know my coworkers are not complying with it. California's taxation website makes no attempt to explain any of this. I am in the position of paying more tax than everybody else because I and I alone actually read the tax statutes and plan to comply with them.

This is mostly just a rant, but I do wonder how they expect ordinary people to comply with this regime. Do you ever feel like you are the only one who complies with tax laws?
« Last Edit: February 28, 2015, 07:42:53 PM by Cathy »

Paul der Krake

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Re: The sucker who complies with tax laws
« Reply #1 on: February 28, 2015, 07:48:41 PM »
I would be curious to see who accurately reported line 18 on NC's return before Amazon started collecting sales tax.

http://www.dornc.com/taxes/sales/use.html

Cpa Cat

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Re: The sucker who complies with tax laws
« Reply #2 on: February 28, 2015, 08:07:16 PM »
I specifically refuse to deal with California. I don't accept clients who have anything to do with California. I don't step foot in California. I don't look at California or think about it, for fear of somehow falling afoul of some silly California tax rule. That's how I comply with California tax law.

California is f-ing ridiculous.

johnny847

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Re: The sucker who complies with tax laws
« Reply #3 on: February 28, 2015, 08:09:09 PM »
I would be curious to see who accurately reported line 18 on NC's return before Amazon started collecting sales tax.

http://www.dornc.com/taxes/sales/use.html
Haha that's a good one. There are several states that do this. I have serious doubts that even 1% of the population actually report it.

Cherry Lane

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Re: The sucker who complies with tax laws
« Reply #4 on: February 28, 2015, 08:10:24 PM »
I would be curious to see who accurately reported line 18 on NC's return before Amazon started collecting sales tax.

http://www.dornc.com/taxes/sales/use.html

Based on the thread title, Consumer Use Tax is what I expected the OP would be writing about.  Virginia has it, too: http://www.tax.virginia.gov/content/consumers-use-tax.  (Interestingly, there is a $100 exemption if the non-taxed goods were procured exclusively through mail-order)

But that California residency bit is totally bizarre!

Cherry Lane

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Re: The sucker who complies with tax laws
« Reply #5 on: February 28, 2015, 08:12:31 PM »
I specifically refuse to deal with California. I don't accept clients who have anything to do with California. I don't step foot in California. I don't look at California or think about it, for fear of somehow falling afoul of some silly California tax rule. That's how I comply with California tax law.

California is f-ing ridiculous.

Uh-oh.  I presume you had to give California a thought in order to write that post.  You might owe some tax now.

robotclown

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Re: The sucker who complies with tax laws
« Reply #6 on: February 28, 2015, 08:13:23 PM »
This is the main reason I will never, ever live in California. 

Cpa Cat

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Re: The sucker who complies with tax laws
« Reply #7 on: February 28, 2015, 08:19:54 PM »
I specifically refuse to deal with California. I don't accept clients who have anything to do with California. I don't step foot in California. I don't look at California or think about it, for fear of somehow falling afoul of some silly California tax rule. That's how I comply with California tax law.

California is f-ing ridiculous.

Uh-oh.  I presume you had to give California a thought in order to write that post.  You might owe some tax now.

You're right.

Not again, California!! Not again!

bacchi

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Re: The sucker who complies with tax laws
« Reply #8 on: February 28, 2015, 08:50:05 PM »
Good god, that's a cluster. Seriously, figure out taxes for each prior tax year using the laws in effect that year?!? That's laughable. I wouldn't do it either.

I did a few weeks work in California and paid non-resident tax. If the form was any more complex than it was (540-NR), I would've skipped it.

Cathy

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Re: The sucker who complies with tax laws
« Reply #9 on: February 28, 2015, 08:57:55 PM »
To be clear, you don't need to submit the past returns, you just need to compute them so you know the carryover amounts that you can possibly use on your present return.

darkadams00

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Re: The sucker who complies with tax laws
« Reply #10 on: February 28, 2015, 09:39:22 PM »
I would be curious to see who accurately reported line 18 on NC's return before Amazon started collecting sales tax.

http://www.dornc.com/taxes/sales/use.html

A state official who thinks the majority of citizens will voluntarily submit figures to increase their tax liability is grossly naive. The attempt of government to try to collect taxes from Internet sales is half-hearted at best and only affects the 1% of citizens who are uber-honest and live under a constant guilt complex. Even the IRS is just now requiring the use of Form 1099-K to help identify large sums of money exchanged via PayPal, credit/debit cards, etc. This is also primarily aimed at Internet sales and only the larger fish at that. The small fry individuals and businesses are excluded. The volume and complexity is just too great to referee effectively with all else that is going on (fraud, identity theft, gross non-compliance, etc).

secondcor521

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Re: The sucker who complies with tax laws
« Reply #11 on: February 28, 2015, 11:54:36 PM »
I used to be uber-compliant, to the point of spending a huge number of hours reading all the tax laws about how to file one year when my kids earned like $10 over some limit, so I ended up filling out a federal and state tax return for each of my three kids so they could pay the $1 in tax that they owed (plus $10 for the privilege of filing their own state tax return because of the $1, so I ended up sending the state three checks for $11).  A royal PITA.

Recently I've decided that life is too short, and I'll do my best (which is still probably far more accurate than most).  Then if the IRS or state want to come after me, they're welcome to; they know where I live.  I'll say I'm sorry, that I tried, show me where I went wrong, and tell me how much of a check to write.

I would feel worse about my decision to become less than uber-compliant if our country's fine crop of leaders were similarly particular about doing the right thing in general.  That's totally an excuse and I should be better than that, but I am not, so there it is.

beltim

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Re: The sucker who complies with tax laws
« Reply #12 on: March 01, 2015, 12:48:08 PM »
I knew that California is one of the states that do not follow the federal government's foreign earned income exclusion.  For this reason, if you're going to retire abroad, before you leave, make sure that you establish residency in a state that does follow the federal foreign earned income exclusion.

Also, your first list, that describes how to calculate your California taxes if you're a part-year resident, is pretty much how every state calculates part-year resident taxes.  I've had to do it every time I moved states.

But in regards to the crazy requiring you to calculate previous tax returns, I hadn't heard of it, but your explanation seems to suggest the only purpose would be to carry forward capital losses, which would reduce your current year taxes.  Did I misread your post?

I sometimes feel like I am the only person in the world who faithfully complies with tax laws. Do you ever feel the same way?

Anyway, when I came across this regime I was blown away for a few reasons:

  • I know for a fact that none of my coworkers in a similar situation are complying with this regime. They are just figuring their tax as if they earned no income in their life before moving to California, which will likely cause them to underpay the true tax liability.
  • If you have foreign income in the year before moving to California and it is exempt from federal taxation, then California has no easy way to find out about it, so as far as I can tell no one reports it.

Cathy

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Re: The sucker who complies with tax laws
« Reply #13 on: March 01, 2015, 12:55:10 PM »
But in regards to the crazy requiring you to calculate previous tax returns, I hadn't heard of it, but your explanation seems to suggest the only purpose would be to carry forward capital losses, which would reduce your current year taxes.  Did I misread your post?

It's not just capital losses; it's any carryover amounts. As far as I can tell, it can only benefit you to do that work, but it's still a lot of work. The exact statutory language is that you have to prepare a return "as if the nonresident or part-year resident were a resident of this state for the taxable year and as if the nonresident or part-year resident were a resident of this state for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions, ..." (emphasis mine).

Now, if you've lived in the USA your entire life, these calculations are probably the same or almost the same as what you did in your previous states of residence, so there is no additional work. However, since I moved from Canada, the regime is quite different so I can't just copy numbers from my previous returns; I actually have to do a ton of computational work (which I finished today, incidentally).


I also was not referring to the foreign earned income exclusion in particular. With that exclusion, you have to report the amounts being excluded on a certain form as part of your federal return. Since California requires you to submit your federal return, you couldn't hide that without falsifying the documents you send them. However, there are other situations were income is not taxed federally and does not show up anywhere on the federal return at all (most notably, income from "without the US" (actual statutory language) earned while you were a nonresident alien). If you have income like that, you are in the position of having to voluntarily disclose information that California would not otherwise know about, and the effect of doing so is to increase your tax liability.

Now, I personally did declare that foreign income that California would not otherwise know about, but I know or strongly suspect that none of my coworkers did (I work for a company with many people moving from foreign countries to California to work here). That is why I felt like a sucker and posted the thread.
« Last Edit: March 01, 2015, 01:13:32 PM by Cathy »

DoubleDown

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Re: The sucker who complies with tax laws
« Reply #14 on: March 01, 2015, 01:10:58 PM »
IRecently I've decided that life is too short, and I'll do my best (which is still probably far more accurate than most).  Then if the IRS or state want to come after me, they're welcome to; they know where I live.  I'll say I'm sorry, that I tried, show me where I went wrong, and tell me how much of a check to write.

+1

I make a good-faith effort to get everything right, but the complexity of some parts of the tax code or filing requirements are beyond reasonable. In some cases it's beyond the capability of educated individuals or even tax professionals to make sense of it, or impossible to determine accurate figures without essentially winging it. Like you, I do my best, but after that I'll let the IRS tell me I'm doing it wrong.

beltim

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Re: The sucker who complies with tax laws
« Reply #15 on: March 01, 2015, 01:18:01 PM »
But in regards to the crazy requiring you to calculate previous tax returns, I hadn't heard of it, but your explanation seems to suggest the only purpose would be to carry forward capital losses, which would reduce your current year taxes.  Did I misread your post?

It's not just capital losses; it's any carryover amounts. As far as I can tell, it can only benefit you to do that work, but it's still a lot of work. The exact statutory language is that you have to prepare a return "as if the nonresident or part-year resident were a resident of this state for the taxable year and as if the nonresident or part-year resident were a resident of this state for all prior taxable years for any carryover items, deferred income, suspended losses, or suspended deductions, ..." (emphasis mine).

Now, if you've lived in the USA your entire life, these calculations are probably the same or almost the same as what you did in your previous states of residence, so there is no additional work. However, since I moved from Canada, the regime is quite different so I can't just copy numbers from my previous returns; I actually have to do a ton of computational work (which I finished today, incidentally).

So I'm curious, what fits into the category of "carryover amounts?"  The only ones I've ever had are capital losses; I'm also aware of some less-common situations like depreciation.  What else is in that category?

beltim

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Re: The sucker who complies with tax laws
« Reply #16 on: March 01, 2015, 01:20:19 PM »
I also was not referring to the foreign earned income exclusion in particular. With that exclusion, you have to report the amounts being excluded on a certain form as part of your federal return. Since California requires you to submit your federal return, you couldn't hide that without falsifying the documents you send them. However, there are other situations were income is not taxed federally and does not show up anywhere on the federal return at all (most notably, income from "without the US" (actual statutory language) earned while you were a nonresident alien). If you have income like that, you are in the position of having to voluntarily disclose information that California would not otherwise know about, and the effect of doing so is to increase your tax liability.

Now, I personally did declare that foreign income that California would not otherwise know about, but I know or strongly suspect that none of my coworkers did (I work for a company with many people moving from foreign countries to California to work here). That is why I felt like a sucker and posted the thread.

As for this, I completely ignored the obviously large case where US filers weren't US citizens.  US citizens would be required to report all income earned worldwide regardless of source.  This makes more sense now, thanks!

Cathy

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Re: The sucker who complies with tax laws
« Reply #17 on: March 01, 2015, 01:38:10 PM »
I also was not referring to the foreign earned income exclusion in particular. With that exclusion, you have to report the amounts being excluded on a certain form as part of your federal return. Since California requires you to submit your federal return, you couldn't hide that without falsifying the documents you send them. However, there are other situations were income is not taxed federally and does not show up anywhere on the federal return at all (most notably, income from "without the US" (actual statutory language) earned while you were a nonresident alien). If you have income like that, you are in the position of having to voluntarily disclose information that California would not otherwise know about, and the effect of doing so is to increase your tax liability.

Now, I personally did declare that foreign income that California would not otherwise know about, but I know or strongly suspect that none of my coworkers did (I work for a company with many people moving from foreign countries to California to work here). That is why I felt like a sucker and posted the thread.

As for this, I completely ignored the obviously large case where US filers weren't US citizens.  US citizens would be required to report all income earned worldwide regardless of source.  This makes more sense now, thanks!

Note that US citizens and resident aliens are treated identically for almost all tax purposes. (The main exception is that residents are only subject to expatriation tax if they are "long-term residents" when they conclude their residency; whereas US citizens are subject to expatriation tax regardless of how long they were citizens if they give up citizenship.)

Once you become a resident alien, you have to pay tax on worldwide income to the USA just like citizens. The different tax regime is only for nonresident aliens or people who were a nonresident alien for part of the year (referred to by the IRS as "dual status aliens").


As for carryover items, the other obvious one is net passive losses. In my personal case, though, that complexity was from net capital losses and I can give a brief explanation of why.

In the USA and in most or all states, capital losses are allowed in the amount of capital gains plus $3,000. In Canada, however, net capital losses are not allowed at all. So basically, if you were living in the USA your whole life, your carryover capital loss would just be your net capital loss remaining on your previous return after claiming the $3,000 -- but that is not the case with your Canadian return. Instead, you actually have to break out your past records and calculate it.

The second reason for the complexity was that a few years ago, before I knew what I was doing, I took a speculative position inside a Canadian tax shelter and lost some money. Since California doesn't recognise that shelter, that loss is deductible, but I have to calculate all the returns between then and now to figure out how much of it can actually be carried forward based on California's rules for carrying over losses. Part of the reason this was obnoxious is that the Canadian broker did not issue me any tax statements in respect of that account because it was a tax shelter so the assumption was you don't need the statements. Thus, I had to figure it out from even more basic records.

Finally, the other obnoxious thing to throw into the mix is having to convert the amounts between CAD and USD. The exchange rate varied wildly over the relevant period and it was in my interest to use the actual exchange rate on the date of each transaction, which as you can imagine added a lot of work to the exercise.
« Last Edit: March 01, 2015, 01:42:34 PM by Cathy »

beltim

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Re: The sucker who complies with tax laws
« Reply #18 on: March 01, 2015, 02:04:46 PM »
The second reason for the complexity was that a few years ago, before I knew what I was doing, I took a speculative position inside a Canadian tax shelter and lost some money. Since California doesn't recognise that shelter, that loss is deductible, but I have to calculate all the returns between then and now to figure out how much of it can actually be carried forward based on California's rules for carrying over losses. Part of the reason this was obnoxious is that the Canadian broker did not issue me any tax statements in respect of that account because it was a tax shelter so the assumption was you don't need the statements. Thus, I had to figure it out from even more basic records.

Finally, the other obnoxious thing to throw into the mix is having to convert the amounts between CAD and USD. The exchange rate varied wildly over the relevant period and it was in my interest to use the actual exchange rate on the date of each transaction, which as you can imagine added a lot of work to the exercise.

Yeah, that sounds like a pain.  At least your work can only benefit you!

daverobev

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Re: The sucker who complies with tax laws
« Reply #19 on: March 01, 2015, 02:25:50 PM »
As a Brit living in Canada, I have a massive problem with the complexity of Canadian tax stuff.

You should go and look at a UK self assessment return. It's in pastel colours with nice large boxes. Most Brits don't even need to fill in a tax return, because everything is deducted at source (and, fuck me, it's done correctly so there is no small refund!). Pension contributions are done 'the other way round' - you put psuedo after tax money in and get an extra contribution immediately 'back' from the government (sort've like an RESP gets CESG, but even more streamlined).

It's like falling off a log all the way up to 'higher rate' taxpayers, and even then I don't believe it's difficult...

Doing my Canadian tax will take me a while, considering all the slips... well, ok to be fair I have cap gains and rental income and yadda yadda...

Sigh.

Oh, and worse, because I have 'foreign property' I get to be reassessed forever, I think it is, rather than just back 5? years.

Mr Dumpster Stache

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Re: The sucker who complies with tax laws
« Reply #20 on: March 01, 2015, 04:50:49 PM »
... and all this is a fantastic reason to live in a state that doesn't have income tax!

Annamal

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Re: The sucker who complies with tax laws
« Reply #21 on: March 01, 2015, 05:09:04 PM »
As a Brit living in Canada, I have a massive problem with the complexity of Canadian tax stuff.

You should go and look at a UK self assessment return. It's in pastel colours with nice large boxes. Most Brits don't even need to fill in a tax return, because everything is deducted at source (and, fuck me, it's done correctly so there is no small refund!). Pension contributions are done 'the other way round' - you put psuedo after tax money in and get an extra contribution immediately 'back' from the government (sort've like an RESP gets CESG, but even more streamlined).

It's like falling off a log all the way up to 'higher rate' taxpayers, and even then I don't believe it's difficult...

Doing my Canadian tax will take me a while, considering all the slips... well, ok to be fair I have cap gains and rental income and yadda yadda...

Sigh.

Oh, and worse, because I have 'foreign property' I get to be reassessed forever, I think it is, rather than just back 5? years.

I haven't had to fill out a tax form in 10 years in New Zealand and my partner who does have to do one every year for contractor income can usually get it done in under an hour.

Tabaxus

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Re: The sucker who complies with tax laws
« Reply #22 on: March 01, 2015, 05:25:08 PM »
... and all this is a fantastic reason to live in a state that doesn't have income tax!

Unless you spend a week working in Cali, and then you're screwed!

I actually was really close this past year to having spent enough time working at my firm's New York office to be concerned about having to pay tax there.  Dodged the bullet, but man, I was sweating bullets on it. 

RetiredAt63

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Re: The sucker who complies with tax laws
« Reply #23 on: March 02, 2015, 06:51:48 AM »
Like daverobev, I used to bitch about calculating Canadian income taxes.  After reading this, never again (and I also have capital gains and investment income).  Income tax for the province depends on where you were living on December 31.  That is it.  So you move - new province, you are paying their taxes.  You live in one province and work in another?  You pay taxes based on where you live.  You can be based in one province and end up working all over, doesn't matter.  The only little twitch there is if you work for the Quebec government in any capacity (i.e. a teacher, nurse at a hospital, etc.) because then your taxes are deducted at (high) Quebec rates.  But you get it back when you file. 

Technically it is the same for sales tax - but basically people don't worry about it unless they are buying something expensive where the sales tax is higher.  Here, where Ontario and Quebec share a long border and Ontario's sales tax is lower, people who buy a car have the dealership deduct Ontario sales tax, because when you are in the thousands it makes sense.

Cathy

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Re: The sucker who complies with tax laws
« Reply #24 on: March 02, 2015, 09:53:37 AM »
What you say about Canada is true for most people, RetiredAt63, but there are other rules for people who depart or move into Canada, or people who conduct business in multiple provinces. On the latter point, generally if you conduct business in a province through a permanent establishment in the province, then any business income attributable to that establishment is taxable by that province. It is therefore possible to be taxed by multiple provinces; in this case, you would file Form T2203. To apportion the tax among provinces, Canada actually uses a less complicated version of the scheme described in the OP where each province's tax is computed by assuming that all income was earned in that province and then pro-rating the tax based on the actual income earned in that province. Canada also has some other quirks for income not taxable by any province (which is subject to a 48% federal surtax).

I should clarify that when I say "Canada", these rules are mostly in the taxation statutes of each individual province, but they work well together to form a unified scheme that can be administered by the CRA. That's the main reason Canada is so much simpler, because the provinces and the federal government coordinated and made tax laws that work harmoniously with each other. In the USA, there was no such attempt by the states and federal government to make a coordinated tax system.

I think it is fair to say, for that reason, that Canada's tax laws are simpler than the US ones, but they are far from simple. I am also very sceptical of the claims that other countries have simple tax laws. Taxes are always simple if you just earn a wage from an employer, but more complicated situations exist everywhere, and it's not really possible to write a simple code that handles everything without being subject to abuses. US and Canada don't just have complicated tax laws for fun; it's because it's necessary (if you accept that a country should have income taxes, anyway). To be clear, I'm not defending the scheme I described in this thread. I'm just saying tax law is likely to have some amount of complexity everywhere.
« Last Edit: March 02, 2015, 10:12:29 AM by Cathy »

daverobev

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Re: The sucker who complies with tax laws
« Reply #25 on: March 03, 2015, 07:05:24 AM »
What you say about Canada is true for most people, RetiredAt63, but there are other rules for people who depart or move into Canada, or people who conduct business in multiple provinces. On the latter point, generally if you conduct business in a province through a permanent establishment in the province, then any business income attributable to that establishment is taxable by that province. It is therefore possible to be taxed by multiple provinces; in this case, you would file Form T2203. To apportion the tax among provinces, Canada actually uses a less complicated version of the scheme described in the OP where each province's tax is computed by assuming that all income was earned in that province and then pro-rating the tax based on the actual income earned in that province. Canada also has some other quirks for income not taxable by any province (which is subject to a 48% federal surtax).

I should clarify that when I say "Canada", these rules are mostly in the taxation statutes of each individual province, but they work well together to form a unified scheme that can be administered by the CRA. That's the main reason Canada is so much simpler, because the provinces and the federal government coordinated and made tax laws that work harmoniously with each other. In the USA, there was no such attempt by the states and federal government to make a coordinated tax system.

I think it is fair to say, for that reason, that Canada's tax laws are simpler than the US ones, but they are far from simple. I am also very sceptical of the claims that other countries have simple tax laws. Taxes are always simple if you just earn a wage from an employer, but more complicated situations exist everywhere, and it's not really possible to write a simple code that handles everything without being subject to abuses. US and Canada don't just have complicated tax laws for fun; it's because it's necessary (if you accept that a country should have income taxes, anyway). To be clear, I'm not defending the scheme I described in this thread. I'm just saying tax law is likely to have some amount of complexity everywhere.

I read a thing a while back about how.. Intuit? - et al, I guess - spent millions lobbying the US Feds to mean people still had to file a return when they were thinking of making it automatic/unnecessary for many people.

I agree tax needs to be complicated if you have a complicated situation, and I agree that for a Canadian that lives and works in one province, only uses RRSPs and TFSAs to invest, then doing a tax return would be an absolute doddle.

But the question is, why should they have to do a tax return at all? They are just confirming to the government (CRA, I should say) what they already know.

In the UK, the accounts department at any company just deals with it. The government contacts YOU if they need info/clarification.

I do my.. "best" to comply with any and all tax laws, and I do my own taxes which is probably a huge mistake, but hey. Partially I like working it out.

NumberCruncher

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Re: The sucker who complies with tax laws
« Reply #26 on: March 03, 2015, 07:24:41 AM »
I would be curious to see who accurately reported line 18 on NC's return before Amazon started collecting sales tax.

http://www.dornc.com/taxes/sales/use.html

A state official who thinks the majority of citizens will voluntarily submit figures to increase their tax liability is grossly naive. The attempt of government to try to collect taxes from Internet sales is half-hearted at best and only affects the 1% of citizens who are uber-honest and live under a constant guilt complex. Even the IRS is just now requiring the use of Form 1099-K to help identify large sums of money exchanged via PayPal, credit/debit cards, etc. This is also primarily aimed at Internet sales and only the larger fish at that. The small fry individuals and businesses are excluded. The volume and complexity is just too great to referee effectively with all else that is going on (fraud, identity theft, gross non-compliance, etc).

[emphasis mine]

o hai.

MA has the same sort of thing and last year we paid tax for online purchases. They had an easy "or you can just pay this much" value that was less than what we would have paid if we somehow correctly tallied up all our purchases.

Nothlit

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Re: The sucker who complies with tax laws
« Reply #27 on: March 03, 2015, 08:35:23 AM »
I would be curious to see who accurately reported line 18 on NC's return before Amazon started collecting sales tax.

http://www.dornc.com/taxes/sales/use.html

A state official who thinks the majority of citizens will voluntarily submit figures to increase their tax liability is grossly naive. The attempt of government to try to collect taxes from Internet sales is half-hearted at best and only affects the 1% of citizens who are uber-honest and live under a constant guilt complex. Even the IRS is just now requiring the use of Form 1099-K to help identify large sums of money exchanged via PayPal, credit/debit cards, etc. This is also primarily aimed at Internet sales and only the larger fish at that. The small fry individuals and businesses are excluded. The volume and complexity is just too great to referee effectively with all else that is going on (fraud, identity theft, gross non-compliance, etc).

[emphasis mine]

o hai.

MA has the same sort of thing and last year we paid tax for online purchases. They had an easy "or you can just pay this much" value that was less than what we would have paid if we somehow correctly tallied up all our purchases.

Yep, that's the "safe harbor" amount and it's based on your MA AGI rather than your actual purchases. For me, too, it usually ends up being cheaper for me than if I added up what I actually would owe, so I go with that. I wouldn't say that I have a guilt complex; I just have a hard time looking at a line on a form that I must sign under penalty of perjury and *not* telling the truth. Maybe others don't have that problem? I certainly would rather not pay the use tax, but I'm not going to lie in order to accomplish that. I use the safe harbor amount because it's a legally available option that minimizes the amount I have to pay, but in the end I've still met my legal obligation.

Numbers Man

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Re: The sucker who complies with tax laws
« Reply #28 on: March 03, 2015, 08:41:30 AM »
I specifically refuse to deal with California. I don't accept clients who have anything to do with California. I don't step foot in California. I don't look at California or think about it, for fear of somehow falling afoul of some silly California tax rule. That's how I comply with California tax law.

California is f-ing ridiculous.

LOL.

PatStab

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Re: The sucker who complies with tax laws
« Reply #29 on: March 03, 2015, 08:41:55 AM »
We comply with it all, husband works overseas so taxes are done by E & Y, company has them done.

This year $55k and without the $44k in foreign tax we would be hosed, yes we comply with all of it much
as possible. There is more to it as it involves hypo tax, I just completed submitting everything.    Final bill
was about $4400 federal and that was likely because of the AMT we had to pay, $720 on state, so not bad
after all is said and done.

cbgg

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Re: The sucker who complies with tax laws
« Reply #30 on: March 03, 2015, 09:20:51 AM »
And THIS is why i believe that in order to have a properly functioning democracy that government programs such as income tax need to be simplified.  The programs that effect every day people should be able to be understood by any literate citizen, not just by highly trained professionals.  Sheesh, this is nuts.

I'm a fellow Canadian who just moved to California in 2015.  I'm not so thrilled about how complicated they make things and I've hardly dug into it.

RetiredAt63

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Re: The sucker who complies with tax laws
« Reply #31 on: March 03, 2015, 03:38:57 PM »
I am sure Cathy is correct re complicated situations.  I have had little difficulty doing taxes when I had to adjust for student credits from a dependent, various incomes (work, pension, investment, REIT, etc.).  Lots of forms but not really difficult.  What really helps is that all the provinces (except Quebec) have harmonized with the federal tax system, so you calculate your federal taxes, then the final step is provincial taxes - file and you are done.  Even when I lived in Quebec, it wasn't that difficult doing the Provincial taxes after I had done the federal.

Of course people with business income will have more to figure out, but that is part of having a business.  I hadn't realized it would be that much more complicated for independent contractors.

PatStab

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Re: The sucker who complies with tax laws
« Reply #32 on: March 03, 2015, 05:52:47 PM »
I did ours before hubby worked overseas and I will do them again after he retires, won't be difficult. 

Ours aren't that difficult now but still they managed to generate a 90 page return, now that is nuts. 
The AMT adds tons of pages, and overseas they cover all kinds of stuff we and most of his fellow
employees will never do.  But its IRS regs so what do you do?



Gone Fishing

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Re: The sucker who complies with tax laws
« Reply #33 on: March 04, 2015, 09:31:59 AM »

retired?

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Re: The sucker who complies with tax laws
« Reply #34 on: March 04, 2015, 12:06:51 PM »
I am relatively well-informed compared to the average Joe RE taxes.  I take the view that one should be able to prepare their taxes themselves or it is too complicated (of course, it is too complicated already for most).

If it takes $100 of my time to comply with something that makes a diff of of $10, then I don't bother.....or, feel the need to.  I give it the old college try.  My tax software usually highlights any questions.

Knowing the govt isn't always rational or reasonable, I ask myself "would the average person feel obligated to do XYZ....or even know they should" to guide me.

libertarian4321

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Re: The sucker who complies with tax laws
« Reply #35 on: March 04, 2015, 03:10:55 PM »
I pay my taxes as required every year, and ALWAYS feel like a chump for doing it, because I know so many other either cheat or don't bother to file at all.

To say nothing of the HUGE percentage of Americans who owe no taxes (due to low income or, worse, deductions that I don't qualify for).

At least I'm in a state (Texas) where I don't have to pay state income tax.  So I only get raped twice (Federal and local taxes) instead of three time (Federal, state, and local).

The worst thing is, I just know that a large percentage of the money I send in is JUST WASTED.

We might be better off with less government, lower taxes, and more freedom.

Yeah, I know, it's crazy talk.

www.lp.org

johnny847

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Re: The sucker who complies with tax laws
« Reply #36 on: March 04, 2015, 03:35:14 PM »
I pay my taxes as required every year, and ALWAYS feel like a chump for doing it, because I know so many other either cheat or don't bother to file at all.

To say nothing of the HUGE percentage of Americans who owe no taxes (due to low income or, worse, deductions that I don't qualify for).

At least I'm in a state (Texas) where I don't have to pay state income tax.  So I only get raped twice (Federal and local taxes) instead of three time (Federal, state, and local).

The worst thing is, I just know that a large percentage of the money I send in is JUST WASTED.

We might be better off with less government, lower taxes, and more freedom.

Yeah, I know, it's crazy talk.

www.lp.org
Living up to your username I see ;)